Average non-mortgage debt grows to $38,619 in B.C.

Tracy Sherlock, Vancouver Sun06.04.2013

Much of B.C. residents' debt increases appear to be coming from loans and auto loans, not credit cards or lines of credit. Loans were up 5.9 per cent, while auto loans were up 5.27 per cent year over year, TransUnion reported.Ryan Remiorz, The Canadian Press Files
/ For Postmedia News

The high cost of housing and transportation in many areas of B.C. contribute to high debt levels here, says Scott Hannah, president and CEO of Credit Counseling Society.GLENN BAGLO
/ Vancouver Sun

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While the rest of the country is paying off their non-mortgage debt at a pace not seen in nearly a decade, B.C. continues to buck the trend, adding on more debt.

TransUnion’s analysis shows that on the West Coast, the average adult’s personal debt has reached $38,619 per person and is growing again after falling between the third and fourth quarters of last year.

Average consumer debt in B.C. grew 3.2 per cent year-over-year, including a 3.7-per-cent jump between the fourth quarter of 2012 and the first quarter of this year, the credit reporting agency found.

Scott Hannah, president of the Credit Counselling Society, a non-profit society that offers free credit counselling services, said he’s not surprised by the numbers.

“We’re carrying too much debt and we live in a really expensive marketplace where an extraordinary amount of a person’s net income is going toward housing and transportation costs, and we just don’t have the income to support it. It’s just not sustainable,” Hannah said.

He says calls to the Lower Mainland offices of the Credit Counselling Society have increased by 23 per cent in the first five months of this year compared to last year, and that the total debt levels of individuals seeking credit counselling are up by about 7.7 per cent.

He sees clients having to make tough choices in order to survive — perhaps choosing between driving a car or owning a home, or deciding to move to another province where housing costs are lower.

Nationally, the average amount of consumer debt fell two per cent this quarter to $26,935, while growing 3.5 per cent year over year.

Thomas Higgins, TransUnion’s vice-president of analytics and decision services, attributes the national drop to people paying off their Christmas bills in the first quarter, with B.C. an anomaly in this regard. Higgins also noted that a similar decrease in balances occurred early in 2011, but was followed by increases later in the year.

The quarterly drop is the largest observed since TransUnion began tracking the figure in 2004.

While Alberta passed B.C. as the most indebted province late last year, the increase in the average British Columbian’s debt in the first quarter put the province back into first place. All other provinces saw a quarter-over-quarter decline, TransUnion found.

Much of the provincial increase appears to be coming from loans and auto loans, not credit cards or lines of credit. Loans were up 5.9 per cent, while auto loans were up 5.27 per cent year over year, TransUnion reported.

“The average Canadian pays approximately $1,398 in interest per year on their lines of credit,” Higgins said. “If the prime rate were to increase by 100 basis points, the yearly payments would rise by $350. An increase of 200 basis points would increase yearly payments by $699, placing more debt burdens on consumers.”

A higher interest rate would hit heavily indebted B.C. residents harder than people living in other provinces, Higgins said.

Delinquency levels remained low for all types of borrowing, with lines of credit and auto loans having the lowest percentages, TransUnion reported. B.C. has the highest default rate in the country for lines of credit at 0.25 per cent, while B.C. has the lowest default rate in the country for credit cards and auto loans, both well under one per cent.

“The delinquency rates are still so low in lines of credit that it’s not really a concern,” Higgins said. “Where there is concern about lines of credit is if there is an increase in interest rates. That debt makes up 40 per cent of all non-mortgage debt and it’s all variable-rate.”

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Average non-mortgage debt grows to $38,619 in B.C.

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